Dow Manages 4.96 Gain Despite Drexel Concerns
Blue chip stocks managed to close slightly higher today despite concerns over huge financial problems at brokerage firm Drexel Burnham Lambert.
The Dow Jones average of 30 industrials rose 4.96 to 2,624.10.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, with 793 stocks up, 677 down and 492 unchanged.
Big Board volume totaled 144.44 million shares, against 118.39 million in the previous session.
The NYSE’s composite index rose 0.31 to 182.86.
The strength among blue-chip issues failed to spread to the broader market, and declining shares outpaced advances by nearly a 4-to-3 margin on the New York Stock Exchange. Composite indexes fell on the American Stock Exchange and the over-the-counter market.
Volume was a light 141.2 million shares, compared with 118.4 million Monday, the slowest day of the year.
The market opened lower after the government announced robust retail sales figures for January, and took a further dive after Drexel’s parent said it would seek federal bankruptcy protection for most of its operations.
But prices began to come back slowly as the market digested both developments.
The Commerce Department said retail sales, driven by renewed automobile sales incentives, climbed 1.6% in January, the steepest increase in more than a year. The news, interpreted as a show of economic strength, at first led traders to fear the Federal Reserve would be unlikely to relax credit and allow interest rates to fall.
On closer inspection, many traders decided the surge might be a one-time event, but the market remained cautious.
The Drexel announcement came as only a small surprise to Wall Street, as many traders had been aware of the investment firm’s problems, analysts said.
Once investors overcame some of their uncertainty about fallout from a Chapter 11 bankruptcy court filing, buyers saw an opportunity to go back into the market, the analysts said.
However, there was still some concern that Drexel’s troubles could affect the rest of the securities industry, analysts said.
